I ran a stock analysis for earnings growth and the Airline Services Group (NASDAQ:ATSG) passed with ease
For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. And in their study titled Who falls prey to the wolf of Wall Street? » Leuz and. al. found that it is “fairly common” for investors to lose money by buying into “pump and dump” schemes.
Contrary to all that, I prefer to spend time on companies like Air Transport Services Group (NASDAQ:ATSG), which not only generates revenue, but also profits. Even if stocks are fully valued today, most capitalists would recognize its earnings as a demonstration of consistent value generation. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.
Check out our latest analysis for Air Transport Services Group
How fast is the airline service group growing?
As one of my mentors once told me, stock price follows earnings per share (EPS). This makes EPS growth an attractive quality for any business. Who among us wouldn’t applaud Air Transport Services Group’s stratospheric annual EPS growth of 39%, compounded, over the past three years? This kind of growth never lasts long, but like a shooting star, it’s worth watching when it happens.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. Although we note that Air Transport Services Group’s EBIT margins have remained stable over the past year, revenues have increased by 10% to $1.7 billion. It is progress.
The chart below shows how the company’s top and bottom line has grown over time. Click on the table to see the exact numbers.
The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. To that end, right now and today, you can view our visualization of consensus analyst forecasts for future Air Transport Services Group EPS 100% free.
Are Air Transport Services Group Insiders Aligned with All Shareholders?
Like kids on the street standing up for what they believe in, insider stock buying gives me reason to believe in a better future. This view is based on the possibility that stock purchases signal an uptrend on behalf of the buyer. However, small purchases don’t always reveal conviction, and insiders don’t always get it right.
While Air Transport Services Group insiders had net sell shares of -US$600,000 over the past year, they invested US$1.1 million, a much higher figure. Overall, to me, this signals their optimism. We also note that it was the , David Soaper, who made the biggest acquisition, paying US$998,000 for shares at around US$24.97 each.
In addition to insider buying, it’s good to see that Air Transport Services Group insiders have a valuable investment in the company. Given that the insiders own a small fortune in stock, currently valued at $52 million, they have plenty of motivation to push the company to success. This should keep them focused on creating long-term shareholder value.
While insiders are apparently happy to hold and accumulate stocks, that’s only part of the pretty picture. The icing on the cake is that CEO Rich Corrado is paid relatively modestly to CEOs of similarly sized companies. I found that the median total compensation for CEOs of companies like Air Transport Services Group with a market capitalization between $1.0 billion and $3.2 billion is around $4.1 million.
The Air Transport Services group CEO received $2.4 million in compensation for the year ending . This is below average for companies of a similar size and seems pretty reasonable to me. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.
Does Air Transport Services Group deserve a spot on your watch list?
Earnings per share for Air Transport Services Group took off like a rocket aimed straight at the moon. Additionally, insiders have a large stake in the company and have purchased more shares. This quick overview suggests that the company may be in good shape, and also at an inflection point, so perhaps Air Transport Services Group deserves some timely attention. Remember that there may still be risks. For example, we have identified 5 warning signs for Air Transport Services Group (1 is potentially serious) of which you should be aware.
As a growth investor, I like to see insider buying. But Air Transport Services Group is not alone. You can see a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.